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Can Bankruptcy Actually SAVE Your Home?

Millions of underwater debtors including individuals and businesses have turned to bankruptcy for relief. While bankruptcy is a powerful way to shield debtors from further debt collection efforts, it does not solve all financial problems. Additionally, there are different things that bankruptcy can accomplish based on the type of bankruptcy that is filed.


Can Do

Bankruptcy can do a lot for debtors, including: 

Eliminate Unsecured Debt

Both Chapter 7 and Chapter 13 bankruptcy fillings can help wipe out unsecured debt, such as credit card debt. Other debts may include personal loans, medical debt and unsecured business debt. These debts are those that the creditor does not have a lien against the property and does not have the right to repossess the item purchased if the debtor does not pay off the debt. 

Although Chapter 13 bankruptcy can also eliminate unsecured debt, it does not have as great a capacity to eliminate it as Chapter 7. Chapter 13 bankruptcy requires the debtor to agree on a debt repayment plan and make continued payments for the number of years detailed in the plan. While secured debts usually have priority, most debtors have to pay back some portion of their unsecured debts. Any debts remaining after the repayment plan expires is generally discharged. 

Place an Automatic Stay

Bankruptcy provides debt relief through an automatic stay. Once bankruptcy is filed, an automatic stay prevents further collection efforts from creditors, including phone calls, letters, repossession attempts or foreclosure actions. 

Keep Certain Assets

Debtors can keep certain assets during a Chapter 7 filing, which are their exempt property. Federal and state-specific laws determine which property is considered exempt and free from liquidation during the bankruptcy process. Bankruptcy does not eliminate liens, so property can still be taken by debtors that do have a lien against certain property. 

A Chapter 13 bankruptcy filing can help prevent a foreclosure action and require the lender to accept a plan that allows the debtor to reimburse the lender for missed payments. A bankruptcy lawyer is often needed during this process who can help show that the debtor will have sufficient income to provide for such payments while staying current on the existing debt. 

Additionally, Chapter 13 bankruptcy does not require the sale of the debtor’s assets, so he or she can also keep non-exempt property. 

Reduce Secured Debt

In many cases, debtors find themselves underwater on their secured debts by owing more money to pay off the property than the property is actually worth. Chapter 13 bankruptcy may allow the debtor to reduce the debt of secured property and then pay off this reduced amount of debt. There are special rules that prohibit reducing secured debt of debts that were acquired within a certain time period near the bankruptcy filing. 

Cannot Do

Although bankruptcy can accomplish many things, some things that it cannot accomplish includes: 

Eliminate Tax Debt

Usually a Chapter 7 filing does not permit a debtor to discharge state or federal income tax debts. A debtor may be able to wipe out some of this debt in a Chapter 13 filing, depending on the type, amount and timing of the debt.

Eliminate Support Obligations

Generally, obligations to pay child support or spousal support survive bankruptcy. With a Chapter 13 filing, the debtor is usually required to show how back payments will be paid in full within the repayment plan period. 

Eliminate Student Loan Debt

Most student loans cannot be discharged in bankruptcy. There are some exceptions, such as if the person is permanently disabled and can demonstrate that repaying the loan would cause undue hardship.

Eliminate All Debt

In Chapter 13, the debtor has to repay much of the debt. Under both types of bankruptcies, the debtor may not be able to eliminate all types of debt, including the debts that the debtor forgot to list in the bankruptcy filing, fines and penalties for criminal action, criminal restitution and certain other debts prohibited by law. Additionally, a creditor may be able to convince a judge not to discharge a certain debt in the interest of fairness, such as not discharging a debt off a recent purchase or one that was made due to fraud. 

Legal Assistance

Bankruptcy is a complex area of law and usually requires the assistance of a lawyer who is knowledgeable in this area of the law. A bankruptcy lawyer can explain the process of bankruptcy and provide information specific to the debtor regarding how bankruptcy can and cannot accomplish certain goals.

6 Ways to Stop Foreclosure

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There are several ways that homeowners can help guard against foreclosure so that they can keep their homes and avoid the negative consequences of this action.


Reasons for Foreclosure

When a person acquires a mortgage on his or her property, the loan is secured with the mortgage. If the person gets behind on the payments or otherwise fails to meet his or her obligations under the mortgage contract, the lender can take steps to foreclose on the home. 

Consequences of Foreclosure

In addition to losing the residence the homeowner, faces many additional consequences if the property is foreclosed upon. The homeowner can be charged for the expenses related to dispossession and other charges allowed by law. In many states, the lender can still pursue a deficiency judgment for any difference between the amount owed on the loan and the sale price. Additionally, the homeowner’s credit will likely be significantly impacted by this event. 

Options

There may be several options available to avoid foreclosure depending on the circumstances, including:

Foreclosure Settlement

Rather than selling the house at auction, the bank may be willing to work out some type of settlement that will allow the homeowner with the loan. 

Loan Modification

The lender may agree to modify the loan rather than foreclosing the property. A loan modification can make an existing loan more feasible by resulting in lower monthly payments, lower interest rates, more time to pay or unpaid payments added to the back end of the loan. In some loan modifications, the amount of the loan may be reduced. The lender may be more willing to work with a homeowner who has taken additional steps to try to meet the financial obligation, such as reducing other expenses or getting an additional job. 

Deed in Lieu of Foreclosure

A deed in lieu of foreclosure results when the person whose name the home is in voluntarily signs the deed to the property back over to the lender. This can help the homeowner avoid the additional expenses related to foreclosure and the public nature of the proceedings. There are some disadvantages to this approach, so it is important that a person in this situation seek legal counsel. 

Short Sale

One common way that a person can avoid foreclosure is by having a short sale of the property. Many lenders during the real estate crisis used short sales as an exit plan so that they would get more proceeds from the sale of the house than they would have received through a public auction. Once the homeowner receives a Notice of Default or otherwise suspects that he or she may have trouble meeting the obligation, he or she may consider a short sale. A short sale occurs when the homeowner sells the property for less than the current value of the property. The lender may agree to this arrangement rather than having to proceed with a foreclosure. However, the lender may still be able to seek a deficiency judgment for the unpaid portion of the loan. Some states do not permit this while others do. Individuals who are considering a short sale should be careful to negotiate an acceptance by the lender of the purchase amount and to accept it as payment in full. Even with this scenario, there may be tax implications to a short sale, so it is important

Bankruptcy

Filing bankruptcy can sometimes help avoid bankruptcy. When a person files bankruptcy, an automatic stay is issued which prevents further collection efforts. Therefore, a bankruptcy works to effectively freeze a foreclosure. However, the homeowner may still wind up losing the home in the bankruptcy proceedings if he or she cannot show that the debt can be repaid. So bankruptcy often works as a mere delay of the foreclosure. However, during bankruptcy, the debtor and the creditors may be able to work out an arrangement that will allow the debtor to repay some of the loan. The secured debt has priority over unsecured debts. Bankruptcy has many ramifications of which the debtor should be aware and seek counsel. 

Legal Assistance

Individuals who believe that they may be in fear of a foreclosure may wish to contact a lawyer. A real estate lawyer can help explain the process of foreclosure and evaluate the individual’s circumstances to determine whether there are any alternatives to foreclosure. He or she can explain the pros and cons of these potential alternatives.

If you have any additional questions or queries contact us at (954).944.2799 or email info@DSALegalGroup.com 

Source: HG

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact an attorney. 

Is The Zero-Down Mortgage Loan Making A Comeback?

Buyers may soon be able to bring less to closing. They were blamed for precipitating the housing crisis years ago, but major lenders are giving no- and low-downpayment loans another shot.

Several major lenders are reportedly offering loans with just 1 percent down. Navy Federal, the nation's largest credit union, offers its members zero-down mortgages in amounts up to $1 million. NASA Federal Credit Union markets zero-down mortgages as well.

Quicken Loans, the third highest volume lender, offers 1 percent downpayment options, as does United Wholesale Mortgage. And the Department of Veterans Affairs has offered zero-down loans to eligible borrowers for many years.

Also, Movement Mortgage, a large national lender, has introduced a financing option that provides eligible first-time buyers with a non-repayable grant of up to 3 percent. As such, applicants can qualify for a 97 percent loan-to-value ratio conventional mortgage, which is basically zero from the buyers and 3 percent from Movement. For example, on a $300,000 home purchase, a borrower could invest zero personal funds with Movement providing $9,000 down. The loan also allows sellers to contribute toward the buyer's closing costs.

So far, the delinquency rates on these low- to zero-down payment loans have been minimal, according to lenders. Quicken Loans says its 1 percent down loans have a delinquency rate of less than one-quarter of 1 percent. United Wholesale Mortgages told The Washington Post that it has had zero delinquencies from the borrowers on its 1-percent down loan since debuting it last summer.

For Movement's new loan product, the lender will originate the loans and then sell them to Fannie Mae, which remains under federal conservatorship. Fannie officials released the following a statement:

"(We're) committed to working with our customers to increase affordable, sustainable lending to creditworthy borrowers. We continue to work with a number of lenders to launch (test programs) that require 97 percent loan-to-value ratios for all loans we acquire." They add that there "is no commitment beyond the pilots," which are "focused on reaching more low- to-moderate income borrowers through responsible yet creative solutions."

During the housing crisis, zero-down loans were among the biggest losses for lenders, investors and borrowers. However, housing experts say the latest versions are different from years ago. Applicants must now demonstrate an ability to repay what's owed. They also must have stellar credit histories and scores, and lenders require a lot more documentation to prove borrowers are in good standing.

Also, many of the programs are charging higher interest rates. For example, Movement's rate for its zero-down payment option in mid-June was 4.5 percent to 4.625 percent, compared with 4 percent for its standard fixed-rate mortgages.

Some critics say that the borrowers who really could benefit from such options aren't able to qualify for them. Paul Skeens, president of Colonial Mortgage Corp. in Waldorf, Md., told The Washington Post that "it seems like people without excellent credit scores and three months of [bank] reserves don't qualify."

Source: "No Down Payment? No Problem, Say Lenders Eager to Finance Home Purchases," The Washington Post (June 14, 2017)

If you have any additional questions or queries contact us at (954).944.2799 or emailinfo@DSALegalGroup.com

 

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact an attorney.

Owners may qualify for mortgage principal reduction

 

MIAMI– The Federal Housing Finance Agency (FHFA) says lenders will be contacting more than 1,400 South Florida homeowners at risk of foreclosure with offers to reduce their unpaid mortgage balances.

The one-time modification would lower their monthly payments in addition to the total amount owed on the mortgages, FHFA said.

To qualify, owners must have a mortgage backed by Fannie Mae or Freddie Mac; live in the home; be 90 days or more delinquent as of March 1; have an outstanding unpaid mortgage balance of $250,000 or less as of March 1; and owe more than 115 percent of what the house is worth.

Statewide, 6,260 homeowners are potentially eligible for the principal reduction program, according to FHFA. Nationwide, 30,761 could qualify, the agency said.

During the worst of the housing crisis, mortgage principal reduction was considered a last resort among lenders because so many people across the country owed more than their homes were worth, said Guy Cecala, publisher of the Inside Mortgage Finance newsletter in Bethesda, Md.

What's more, there was concern that homeowners would intentionally default on mortgages to qualify for a principal reduction, and lenders did not want to reward those people, Cecala said.

Now that the housing crisis is over, reducing mortgage balances for struggling homeowners won't result in big dollar losses for the government, according to Cecala.

"The numbers are quite small," he said. "The inventory of distressed properties has shrunk dramatically. Dealing with it now is much more manageable."

To accept the offer, homeowners have to make three on-time payments and sign an acceptance letter, according to FHFA.

The agency encourages homeowners who think they qualify but have not received an offer in the mail to contact their individual lenders directly.

Even if homeowners aren't eligible for principal reduction, they may qualify for another program, FHFA said.

"The sooner you let them know you're having difficulty, the greater the number of options your servicer will have at their disposal to help," the agency said in a blog post.

Do You Know How The Fair Foreclosure Act Will Affect You?

 

Florida was among the hardest hit states in the national housing crisis, and state courts are still dealing with the flood of foreclosures crowding dockets. The Florida Fair Foreclosure Act (“FFFA”) was signed into law in attempt to unclog the court system with an expedited foreclosure process that both hurts and helps distressed homeowners.

Florida is a judicial foreclosure state, which means all foreclosure actions must be handled in a state court. The Florida Fair Foreclosure Act did not change that. However, there were some significant changes in the Florida foreclosure process that homeowners facing foreclosure need to know.

How the Florida Fair Foreclosure Act Helps Homeowners.

Lender Must Prove Ownership of Note. Before the Florida Fair Foreclosure Act was enacted, lenders were able to file foreclosure actions without having to prove they owned the promissory note. This led to a number of abuses and wrongful foreclosures. Now, lenders must prove they have the right to foreclose on a property by producing the promissory note or documentation that shows ownership of the debt has been legally transferred to them.

Reduction in Deficiency Judgment Statute of Limitations. If a homeowner owed more than his or her house was worth, the difference is known as a deficiency. In Florida, lenders can pursue a personal judgment against a homeowner for the deficiency amount. With the passage of the Florida Fair Foreclosure Act, the time a lender has to pursue a deficiency judgment has been reduced from five years to one year. In addition, a deficiency judgment cannot be more than the difference between the judgment amount and the fair market value of the home on the day it was sold.

How the Florida Fair Foreclosure Act Hurts Homeowners.

Any Lienholder May Request Expedited Foreclosure. The Florida Fair Foreclosure Act makes it possible for any lienholder — a homeowners association or condo association — to petition the court for an expedited foreclosure. This means that homeowners may have less time to seek a loan modification or other workout that could avoid foreclosure.

Foreclosure Judgments Final. Under the Florida Fair Foreclosure Act, foreclosure judgments in Florida are final. Any legal challenges are limited to monetary damages when certain conditions are met by the lender, including:

- Homeowner was served properly in the foreclosure action;
- Final foreclosure judgment was entered;
- Appeal period has been exhausted; and
- Home has been purchased by someone unaffiliated with the lender or former owner.

For more information on the Fair Foreclosure Act, visit our website www.dsalegalgroup.com.

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Mortgage Underwater? 4 Options That May Help

We've all heard this term of a a mortgage being "underwater".  What it simply means is that you owe more on the mortgage than the home is actually worth.  Its a precarious situation that leaves few options for most.  Nearly one out of every five mortgages is underwater.  But that doesn’t make it any less painful.

If you find yourself with your mortgage underwater, here are several options that may help you counter this problem.

Option 1: Ride out the storm
Many people panic when they find out that they have their mortgage underwater – but the situation doesn’t always demand action. If you can make the payments and you’re happy with your house (aside from its current valuation), staying put may actually be your best option. This allows you to avoid the stress and expense of moving or modifying your loan, and over time the value of your home is likely to increase; eventually you may break even or even see some equity and get out of having your mortgage underwater.

Option 2. Request a short sale
If you have to move or if you’re having trouble making your payments, you can request a short sale from your lender. With a short sale, the lender agrees to accept less than you owe as payment on the property and forgive the remainder of the debt. Lenders are typically only going to do this if you have already defaulted on the loan. A short sale is a complicated process that requires the assistance of a lawyer and a real estate agent. A short sale will have a negative impact on your credit, so it’s not something to undertake lightly.  But, if executed properly, it can solve the issue of having your mortgage underwater but getting you out of a bad debt situation.

Option 3: Rent out your home
Renting your home can be a challenge, but it presents a viable option in some circumstances – especially if you are unable to sell the home but can’t afford to keep making payments on your mortgage. You’ll need a new insurance policy on the property, and you may need someone to manage the property or a real estate agent. Ideally, the rental amount you receive should cover property management fees, your monthly payment, insurance, and taxes.


Option 4. Refinance
There are a variety of government programs that may be helpful. One is the Home Affordable Refinance Program (HARP). If you’re current on your house payments but have a mortgage underwater, you may be eligible to refinance through this program. Your current mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae, and it must’ve been sold to Freddie Mac or Fannie Mae on or before May 31, 2009.

Refinancing through the Federal Housing Administration is also a possibility. You need to be current on house payments and the mortgage must have been endorsed on or before May 31, 2009.

 Written by Jurado & Farshchian, P.L.

3 Foreclosure Myths That Can Cost You Your Home

by Stefan McHardy, Esq.

For anyone faced with the prospect of losing their home to foreclosure, the pressure alone is enough to drive you up a wall.  Now throw in the reality of it all; the high-powered bank suing you in court (if you live in a judicial foreclosure state, that is), their high-priced lawyers, and the convoluted mess of a system we've come to know as the loan modification process.

Now I can very easily start out by claiming mistake number one is not hiring an attorney to represent your legal rights, etc., etc., etc.  But, besides being far too cliché for anyone's liking, the simple fact is this: it’s your home and however you choose to defend it is up to you.  There aren't many countries in the world that give you the rights to defend yourself and your property as this one.  But for the record, you should at least consult with a foreclosure defense attorney.

With that said, if you're going to get all Matthew McConaughey/Lincoln Lawyer about it, then at the very least give yourself a fighting chance and proceed in an informed way.  Lets bust a few myths.

Myth: If I'm Doing a Loan Modification They Can't Sell My House at Foreclosure Auction.

Yes they can.  Unless you have a court order, signed by a Judge, ordering that foreclosure sale canceled, the foreclosure sale will not be stopped simply because your modification package is under review.  The loan servicer that is reviewing your application is under no legal obligation to ask the court to cancel the foreclosure sale.  It's up to you, to notify the court by filing a motion and setting a hearing.  Once you get in front of the judge for that hearing, then you can bring it to his or her attention that the loan modification application is still pending review and that you would like the foreclosure sale canceled.

Now, I know many of you who have been through this are saying that you've had the bank's lawyers cancel the sale for you.  Well, congrats to you.  You have the friendliest opposing counsel the bank's money can buy.  But, if your legal strategy is to depend on the kindness of the lawyer who is being paid to take your house, then my friends, you have a tougher road ahead of you than you think.

Myth: If I'm Doing a Short Sale They Can't Sell My House at Foreclosure Auction.

Again, not true.  And if your realtor tells you this, then shame on you for taking legal advice from a realtor.  Unless your realtor just happens to also be a seasoned, skilled, and [quite charming] attorney. In that case, this savvy realtor-lawyer would never tell you such a thing.

Short Sales, much like loan modifications, need to be negotiated with and approved by the lender.  In fact, if you've ever seen the paperwork you have to fill out for a short sale approval, it is virtually identical to the loan modification paperwork.  And just like the above myth with the loan modification application, it's not a guarantee or a requirement on the part of the bank to cancel any upcoming sale just because your application is pending approval or currently listed for [short] sale.  And more importantly, the clock is always ticking; meaning, if your home isn't selling, or isn't getting approved for short sale, even the most patient of judges will eventually tell you it's "too little, too late."

Myth: Filing Bankruptcy Will Stop The Foreclosure.

Well maybe you're a better Lincoln Lawyer than we all thought because you are distorting the word "stop" more than Bill Clinton distorted the word "relations".  Although bankruptcy can delay foreclosure, if done correctly, that alone will certainly not make the problem go away.  What you are actually doing here is having the foreclosure delayed in state court while a federal judge in the bankruptcy court weighs the merits of your bankruptcy claim. (So now you are taking on a federal court case as well, Lincoln Lawyer.  Time to increase your retainer fee!).  If the federal court determines that you do not qualify for bankruptcy, or if your case is dismissed for any other reason, then the state court will reset your foreclosure sale date.

I'm not saying it's impossible to get out of trouble if you go about a bankruptcy correctly, but quite honestly, federal bankruptcy court is not a playground for the inexperienced.

-Stefan McHardy, Esq.